The recent decision of Pilgrim v Vanderstelt summarizing an award of costs in family law
Even if you are entirely successful in your family law case, the notion that you will obtain costs for all your legal fees from the other party is normally wrong. However, you may be awarded some of your legal fees depending on various factors. In rare cases you may get full recovery.
According to the Court of Appeal decision of Fong v Chang, the purpose of costs is to indemnify successful litigants for the cost of litigation, to encourage settlements, and to discourage and sanction inappropriate behaviour by litigants. These themes are prevalent throughout the applicable provision dealing with cots in the Family Law Rules. There is an additional purpose being to deal with cases justly.
Overview of Pilgrim
Pilgrim v Vanderstelt provides a summary of the guiding principles on costs awards. Section 131(1) of the Courts of Justice Act gives courts the authority to determine costs on a discretionary basis, subject to the Family Law Rules in the case of family law disputes. Section 24(1) of the FLR establishes the presumption that a successful party is entitled to the costs of “a motion, enforcement, case or appeal.” So how are costs determined? Pilgrim goes on to discuss section 24(12) of the FLR:
In setting the amount of costs, the court shall consider,
(a) the reasonableness and proportionality of each of the following factors as it relates to the importance and complexity of the issues:
(i) each party’s behaviour,
(ii) the time spent by each party,
(iii) any written offers to settle, including offers that do not meet the requirements of rule 18,
(iv) any legal fees, including the number of lawyers and their rates,
(v) any expert witness fees, including the number of experts and their rates,
(vi) any other expenses properly paid or payable; and
(b) any other relevant matter
While these factors are self-explanatory, the Court of Appeal decision of M(CA) v M(D) notes that these factors ought to be applied flexibly. Various other cases offer guidance as well.
Cases like Butty v Butty remark that a consideration of the relative success of the parties in the case is the starting point to a costs analysis. Johanns v Fulford says that success is assessed by comparing the award with the original relief requested in the pleadings and offers to settle.
The Court of Appeal decision on costs, M(CA) v M(D) basically says that costs are not guaranteed even if you are successful:
(a) although the Family Law Rules have circumscribed the broad discretion granted by s. 131(1) of the Courts of Justice Act, they have not completely removed the trial judge's discretion;
(b) although the general provision, rule 24(1), enacts a "presumption" that the successful party is entitled to costs of the case it does not require that the successful party is always entitled to costs;
(c) a successful party may not obtain a costs award in his or her favour even in circumstances not falling within rule 24(4);
(d) there may be circumstances aside from the unreasonableness of the successful party's conduct that rebut the presumption; and
(e) the financial situation of the parties can be taken into account in setting the amount of the costs award either under rule 24 or rule 18 pursuant to the direction in sub rule 24(11) that the court take into account "any other relevant matter".
In other words, the Court still holds a fair amount of discretion in determining costs. A Court even has the power to consider the health of a party’s financial situation in determining an award.
Offers to Settle
Perhaps one of the most important factors in determining costs is the examination of Offers to Settle, pursuant to rule 18 of the FLR (which warrants its own blog post unto itself). If Offers to Settle are done properly, and within the applicable time frame, then they have substantial effects. According to section 18(14), if a party who made the offer in the appropriate time frame obtains an order that “is as favourable as or more favourable than the offer”, and the offer was not accepted or withdrawn, they will be entitled to full recovery from the time of that offer onward. In other words, the Court has little tolerance for parties who do not accept reasonable offers. This also means that a losing party can still be entitled to some of their costs if they presented an offer that was better than the order.
In the current case, the parties argued as to whether the Applicant’s letter constituted an Offer to Settle. Importantly, the Court noted that a letter by a party’s counsel can still constitute an Offer to Settle for the purposes of costs, even if it was not signed: …subrule 18(16) provides that when the court exercises its discretion over costs, it may take into account any written offer to settle, the date it was made and its terms...
General remarks on the case law in Pilgrim
Pilgrim v Vanderstelt also remarked on other important notes:
...the case law directs that a costs award must represent a fair and reasonable amount that should be paid, rather than an exact measure of the actual costs, must be consistent with what the unsuccessful party might reasonably have expected to have to pay, and must reflect some form of proportionality to the actual issues argued, rather than an unquestioned reliance on billable hours and documents created (see Mason v. Smissen,  O.J. No. 4229 (Ont. S.C.J.) at paras. 5 and 6 and the cases therein referred to).
As recently emphasized by the Court of Appeal in Beaver v Hill, 2018 ONCA 840 at paras. 12–13, proportionality and reasonableness are the touchstone considerations to be applied in fixing the amount of costs in family proceedings and a "close to full recovery" approach is inconsistent with the fact that the Family Law Rules expressly contemplate full recovery in specific circumstances, e.g. bad faith under r. 24(8), or besting an offer to settle under r. 18(14).
In the current case, the Applicant was successful and awarded costs on a substantial indemnity basis, having regard to all the applicable factors.
Rule 24 of the FLR provides for various other important considerations. For example, subsection 4 provides for divided success, subsection 5 discusses reasonableness, subsection 7 deals with unprepared parties, subsection 8 deals with the consequences of bad faith which can be quite significant, and subsection 9 deals with costs caused by an agent or lawyer. See section 24 of the Rules for more.
Obvious takeaways? Successful litigants are usually entitled to some costs for their legal fees. The Court has a lot of discretion in this analysis. Offers to Settle continue to be one of the predominant factors that Courts consider when deciding costs. It is always important to consider providing for or accepting a reasonable offer, within the appropriate time frame, in order to have the best possible costs consequences.